TaxTMI 
TaxTMI 
1971 (7) TMI 23
X X X X Extracts X X X X
X X X X Extracts X X X X
.... he returned an income of Rs. 27,677 from dividends and claimed against it a deduction of Rs. 18,934 which was made up of interest at Rs. 9,408 paid to the bank and interest at Rs. 9,526 paid to the other creditors. The Income-tax Officer and the Appellate Assistant Commissioner allowed the whole of the deduction as a business loss under section 10(2)(iii and not under section 12(2) of the Income-tax Act, 1922, as claimed by the assessee. By a cryptic order, the Tribunal has allowed the deduction to the extent of Rs. 9,408 only which amount was paid by the assessee to the bank by way of interest on the overdraft. The reason given by the Tribunal in support of its order is difficult to summarise and it is better that we set out its conclu....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e computed after making allowance for any expenditure incurred solely for the purpose of earning such income. The question therefore which requires consideration is whether the interest paid by the assessee to the bank on the overdraft account is an expenditure incurred by him solely for the purpose of earning the dividends. The Tribunal has not applied its mind to the provisions of section 12(2) at all and has allowed the deduction partially, on the ground that there can be said to be " a co-relation between the dividend income and the interest payment established through the bank account ". We regret to have to say that it is impossible to understand from the judgment of the Tribunal as to which bank account it had in its mind and what....
X X X X Extracts X X X X
X X X X Extracts X X X X
....se of earning the dividends and any reasonable sum paid by way of commission or remuneration to a banker or any other person realising the dividend on behalf of the assessee. The initial difficulty in the way of the assessee is that he failed to show that the overdraft account was created for the purpose of buying the shares. Consequently, he failed in establishing the important requirement that expenditure in the shape of payment of interest was incurred by him for the purpose of earning the dividend on the shares. The Tribunal was, therefore, in error in coming to the conclusion that a co-relationship was established between the dividend income and the interest paid to the bank This is apart from the vital consideration that such a co-....
X X X X Extracts X X X X
X X X X Extracts X X X X
....in the instant case, the borrowing of the by way of overdraft from the bank was not for the purpose of acquiring shares with the object and purpose of earning dividend on those shares and therefore section 12(2) can have no application. But, Mr. Das toor appearing on behalf of the assessee argues that the trial balance-sheet which was produced in the ment proceedings shows that though the was, by and large, a speculator, he had purchased certain shares with the sole object of investing in those shares. We do not propose to deal with this contention on its merits, because such a contention cannot be entertained in the present proceedings. Mr. Dastoor's claim may perhaps stand scrutiny but it was never urged at any earlier stage of the presen....